Advise please-Essential works voluntary loan with Southwark council

tilthe

I am trying to sign up for a voluntary loan with Southwark council. They say the interest rate is 2% about Natwest base rate. Right now that is 0.5%, so the offered interest rate is 2.5%. Yet when I use the loan calculator, the total interest payable is higher than what is quoted by Southwark council. It says that if I get a loan of 12,587 poundsfor the 25 year-300 months period, my total interest repayable will be 7866.00.. This would effectively bring the interest rate to about 4%! Yet when I use the loan calculator, it comes to 4353 pounds! That is too huge a difference to be explained away as rounding error. I asked for an explanation and they said their loans are calculated differently and the refuse to explain these calculations. (In fact getting the Account officer to answer questions was like pulling teeth! Instead they say the deadline has passed so therefore the loan is no longer available to me.
Can anyone give any advise on how to deal with this situation?

Gaz83

tilthe wrote: »

I am trying to sign up for a voluntary loan with Southwark council. They say the interest rate is 2% about Natwest base rate. Right now that is 0.5%, so the offered interest rate is 2.5%. Yet when I use the loan calculator, the total interest payable is higher than what is quoted by Southwark council. It says that if I get a loan of 12,587 poundsfor the 25 year-300 months period, my total interest repayable will be 7866.00.. This would effectively bring the interest rate to about 4%! Yet when I use the loan calculator, it comes to 4353 pounds! That is too huge a difference to be explained away as rounding error. I asked for an explanation and they said their loans are calculated differently and the refuse to explain these calculations. (In fact getting the Account officer to answer questions was like pulling teeth! Instead they say the deadline has passed so therefore the loan is no longer available to me.
Can anyone give any advise on how to deal with this situation?

Find someone else to give you a loan of £12,587 over 25 years?

HappyMJ

It may be interest only.

£12,587 multiplied by 2.5% multiplied by 25 years is £7,866.

You pay the capital back at the end.

What are the monthly repayments?

Maybe the loan calculator you are using assumes a repayment loan.

Pixie5740

The BoE base rate is currently 0.5%. Are you sure that NatWest's base rate is also 0.5%?

tilthe

Pixie5740 wrote: »

The BoE base rate is currently 0.5%. Are you sure that NatWest's base rate is also 0.5%?

yes it is 0.5%. It is even quoted as such in their paperwork.

tilthe

Gaz83 wrote: »

Find someone else to give you a loan of £12,587 over 25 years?

I would love to do this but my credit is not very good right now. I was underemployed for almost 5 years. I am actually just now getting back on my feet. Just paid off my welcome finance loan in full last month, so I am really just trying to rebuild my credit now. Thanks for the suggestion though. I wish I could.

tilthe

HappyMJ wrote: »

It may be interest only.

£12,587 multiplied by 2.5% multiplied by 25 years is £7,866.

You pay the capital back at the end.

What are the monthly repayments?

Maybe the loan calculator you are using assumes a repayment loan.

I will definitely look into this... The loan is supposed to be on a repayment basis though but I will ask... Thanks

ViolaLass

You're borrowing £12k to rebuild your credit rating?

tilthe

ViolaLass wrote: »

You're borrowing £12k to rebuild your credit rating?

Ummm.... no. I am not borrowing 12k to increase my credit. I am a leaseholder with Southwark council. They have sent us all bills for essentials works (which we do not have a choice but to pay). And then offered us different payments options since they are huge bills. One of the options is accepting a voluntary loan from them which they have offered at 2% above Natwest base rate. I would much rather not take on any more loans for the rest of my life, but apparently I do not have a choice over here...

Clive_Woody

tilthe wrote: »

Ummm.... no. I am not borrowing 12k to increase my credit. I am a leaseholder with Southwark council. They have sent us all bills for essentials works (which we do not have a choice but to pay). And then offered us different payments options since they are huge bills. One of the options is accepting a voluntary loan from them which they have offered at 2% above Natwest base rate. I would much rather not take on any more loans for the rest of my life, but apparently I do not have a choice over here...

One other point to check is this a fixed rate loan or is the APR going to go up every time BoE rate and presumably Natwest base rate goes up. Over 25 years this could make a big difference to total amount repaid.

Gaz83

tilthe wrote: »

I would love to do this but my credit is not very good right now. I was underemployed for almost 5 years. I am actually just now getting back on my feet. Just paid off my welcome finance loan in full last month, so I am really just trying to rebuild my credit now. Thanks for the suggestion though. I wish I could.

If, as you say, the loan offer is no longer available to you then unfortunately I don't think you have any other option.

Hopefully you get something sorted.